EC Charges 82 Individuals and Companies in Second Nationwide Microcap Fraud
Sweep
FOR IMMEDIATE RELEASE 99-90
26 Actions Involve More Than $12 Million
Washington, D.C., August 3, 1999 - The Securities and Exchange Commission today
announced the filing of 26 enforcement actions against 82 defendants and respondents
across the country for engaging in fraudulent microcap schemes from which they
profited by more than $12 million and cost investors untold millions. This is the SEC's
second nationwide sweep targeted at microcap fraud.
SEC Director of Enforcement Richard H. Walker said, "Today's microcap fraud sweep
demonstrates that the Commission will continue to bring maximum resources to bear in
cleaning up the microcap market. This market is too vital to our nation's small businesses
to allow it to be spoiled by a corrupt few. Today's sweep caps off a successful string of
actions over the last few years where, working with the NASD, federal, state and local
authorities, we have locked the gate of some of the most notorious boiler rooms
including Stratton Oakmont, A.S. Goldmen, A.R. Baron and Sterling Foster. Together,
we have made great progress and we will not let up in our efforts until the job is done."
Today's actions take aim at all of the participants in a microcap fraud - from the
dealmakers who orchestrate manipulations, to the salespeople in boiler rooms who help
carry them out. Issuers, officers, directors, promoters, accountants, attorneys,
broker-dealers (both introducing and clearing firms), and transfer agents were rounded
up in these enforcement actions. In four cases, investors were lured into the market for a
manipulated stock by false information communicated on the Internet.
Importantly, the actions include stiff sanctions against accountants and attorneys who
create and file the necessary documents and put their professional stamp of approval on
a fraud.
Selected Case Summaries
Today's cases include the following schemes:
In a classic pump-and-dump, defendants brought a California airline public through a
merger with a public shell company. Although the airplanes never took off, the stock
price did through bogus trades and false statements in press releases and an Internet
newsletter. After pumping up the price to $5, defendants operated an unregistered
broker-dealer to solicit investors to purchase stock defendants were dumping.
Defendants unloaded 1 million shares before the price collapsed back to less than 20
cents. Four defendants had prior records, ranging from multiple felony convictions to a
SEC injunction and a NASD bar. (SEC v. Durante)
Husband and wife officers of a California company stole offering proceeds of $900,000
to pay for personal expenses and vacations in Hawaii, New York and Europe. The
couple also realized profits of $400,000 by selling stock while in possession of material
nonpublic information about the company's fraudulent accounting practices. (SEC v.
American Telephone + Data)
Ten brokers in the New York and Chicago branch offices of a broker-dealer targeted
retired customers and engaged in classic boiler-room sales practice fraud. At least 77
customers lost over $800,000 while the brokers collected over $250,000 in
commissions. Typical of the defrauded customers is an 81-year old retiree whose wife is
suffering from Alzheimers disease. (SEC v. Barzilay)
A Bolivian mining company without basis inflated its assets by assigning a $40 million
value to Bolivian mineral properties that had been acquired in a sham transaction.
Respondents issued press releases and other material with false statements about these
assets and other aspects of the company. Respondents dumped their stock onto the
market, reaping nearly $4 million. (In the Matter of Dynamic American Corp.)
A chart summarizing all of the actions brought today is available by calling
202-942-0020.
The Commission had previously suspended trading in the stock of three issuers involved
in today's actions (American Telephone + Data, Comparator Systems, and PanWorld
International) for a single ten-day period based on the dissemination of false and
misleading information about the companies. The Commission's suspension of trading
stopped the ongoing manipulations and placed an additional burden on broker-dealers
to update their files with accurate information about the companies before they resumed
or began quoting the securities. Since the Commission's first microcap fraud sweep in
September 1998, it has suspended trading in the stock of 19 microcap issuers.
These enforcement actions are part of the Commission's four- pronged approach to
attacking microcap fraud: enforcement, inspections, investor education, and regulation.
For information about the SEC's response to microcap fraud and the litigation releases
for each of these cases, visit the SEC's Microcap Fraud Information Center at
www.sec.gov/news/extra/microcap.htm.
The SEC acknowledges the valuable assistance of the National Association of
Securities Dealers in a number of these cases.
SEC Encourages Investors to Get the Facts
Information is an investor's best tool for investing wisely and avoiding fraud. But many
microcap companies do not file reports with the SEC, making it difficult to get the facts
about the company's management, products, services, and finances. When reliable
information is scarce, fraudsters can easily spread false information about microcap
companies - especially on the Internet - making profits for themselves while creating
losses for unsuspecting investors.
"Get the facts before you invest - don't risk losing your life savings to fraud," said Nancy
M. Smith, Director of the SEC Office of Investor Education and Assistance.
"Sometimes, just one phone call to your state securities regulator to check out brokers
and investments can save you from losing money."
Before investing in microcap stocks:
Call your state securities regulator and ask whether the broker and the firm are licensed
and if there's a record of complaints or fraud.
Independently check the truth of every statement about the company-especially in a
press release or newsletter.
Don't fall for promises of quick profits or guaranteed returns, or be pressured to invest
before you investigate.
Get a free copy of the SEC brochure, "Microcap Stock: A Guide for Investors" at
www.sec.gov or by calling toll-free 1-800-732-0330.
"Microcap Stock: A Guide for Investors" explains how to find information about
companies, what to watch out for, and where to turn if you run into trouble. For more
practical tips on how to invest wisely and avoid investment fraud, visit the SEC's
website at www.sec.gov.
List of Cases and SEC Contacts
SEC v. American Telephone + Data, Inc. (contact Richard Sauer 202-942-4777)
In the Matter of Gerald Hinshaw, CPA (contact Richard Sauer 202-942-4777)
In the Matter of American Telephone + Data, Inc. (contact Richard Sauer
202-942-4777)
SEC v. Janson Capital (contact Spencer Barasch 817-978-6425)
SEC v. Barzilay (contact Jeannette Lewis 312-353-7410)
In the Matter of Del Mar Financial Services (contact Brian Ochs 202-942-4740)
In the Matter of Dynamic American Corp. (contact Daniel Shea or Donald Hoerl
303-844-1030)
In the Matter of Jethro J. Barlow (contact Daniel Shea or Donald Hoerl
303-844-1030)
SEC v. Lambert D. VanderTuig (contact Sandra Harris 323-965-3962)
In the Matter of Fastlane Footwear (contact Sandra Harris 323-965-3962)
SEC v. First Entertainment Inc. (contact Daniel Shea or Donald Hoerl 303-844-1030)
In the Matter of Morton B. Lempel (contact Daniel Shea or Donald Hoerl
303-844-1030)
In the Matter of Jeffrey W. Berns (contact Daniel Shea or Donald Hoerl
303-844-1030)
In the Matter of G. Bradley Taylor (contact Daniel Shea or Donald Hoerl
303-844-1030)
In the Matter of Nicholas Catalano (contact Daniel Shea or Donald Hoerl
303-844-1030)
SEC v. Kanakaris Communications, Inc. (contact Daniel Shea or Donald Hoerl
303-844-1030)
In the Matter of National Stock Transfer, Inc. (contact Daniel Shea or Donald Hoerl
303-844-1030)
In the Matter of Richmark Capital Corp. (contact Spencer Barasch 817-978-6425)
SEC v. Edward A. Durante (contact Helane Morrison 415-705-2450)
SEC v. Richard H. Steinberg (contact Daniel Shea or Donald Hoerl 303-844-1030)
In the Matter of Energy Equities, Inc. (contact Daniel Shea or Donald Hoerl
303-844-1030)
SEC v. Arete Industries, Inc. (contact Daniel Shea or Donald Hoerl 303-844-1030)
In the Matter of Michael Reilly (contact Daniel Shea or Donald Hoerl 303-844-1030)
In the Matter of John Kenna (contact Daniel Shea or Donald Hoerl 303-844-1030)
In the Matter of Steven James Cook (contact Daniel Shea or Donald Hoerl
303-844-1030)
SEC v. North American Corporate Consultants (contact Sandra Harris 323-965-3962)
sec.gov |
